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Saturday, January 8, 2011

Peak Oil

Below is a comment posted on Max Keiser's website. It's intelligent, articulate and well worth reading:

'The late Matt Simmons correctly pointed out as the price of oil increases so does the cost of getting the oil out of the ground. Also there is a total lack of maintenance in oil infrastructure. Rust never sleeps and as cheap oil disappears society doesn’t have the spare resources or finances to keep things running. How expensive would it be to replace the Alaskan pipe when oil is costing $150 per barrel? Could it even be financed? A couple of years ago part of the Alaskan pipe was shut down because it rusted out. The company slapped on a few patches and called it done. what about the rest of the pipeline?

Those who deny peak oil (production) assume technology will save us so we need not worry. The problem is that the USA has used everything technology known to man and still they can not raise American domestic oil production. Arguments that environmentalists are preventing the USA from getting at the trillions of barrels of oil under their feet is total hogwash. The environmentalists would be pushed aside in seconds if there was easy to get at oil. The real reason is that most unused oil discoveries are not economical but the oil companies don’t want to say that.

I have friends who have been in the oil business for over 30 years and worked in the Arctic in the 70s and 80s. The company they worked for gave up on the Arctic because there was no commercially viable oil fields found. These guys have worked all over the world including the cleanup on the BP blowout in the Gulf as I write. Most of the time the new oil fields being discovered are not paying for the special rigs that have to be built. The drop off rate of offshore oil fields is enormous. It is real hard to make money in the offshore oil discovery business. That is why the oil exploration companies are big into 3D seismographic exploration as drilling a well is very costly. Even when they do drill they do very little testing so estimates of recoverable oil are more marketing hype than geological fact.

We should be using the last of the cheap oil to develop a more robust energy infrastructure. We should not rely too much on any one source of energy. OK yes it is pie in the sky. However, where I live only fools have one source of heat. Each source of heat (oil, gas, electricity) has fail in the last couple of decades and a few days with no heat in the middle of -20C gives you a whole new outlook on robust infrastructure.